Vancouver-based Version One Ventures has raised its third fund, drawing $57-million from a mix of Canadian and international backers including American investment management giant Invesco Ltd. and European investment management firm Sofina SA. International investors accounted for about one-third of the fund, compared with less than 10 per cent for each of Version One’s last two funds.
It marks the second time this year a top-rated Canadian seed-stage venture fund has attracted significant international capital to invest in young, promising Canadian technology startups amid growing international interest in thriving innovation hubs away from Silicon Valley. Toronto’s Golden Ventures raised more than a quarter of its $72-million third fund from American investors earlier this year. Several other Canadian venture funds that invest in later-stage firms have also raised significant funding from outside Canada in the past year.
“Version One has always been in these emerging ecosystems like Toronto, New York, Waterloo and Seattle,” said Version One founder and general partner Boris Wertz, a former entrepreneur who began investing in early-stage companies a decade ago. “We feel this trend is really playing in our favour.”
Invesco’s Venture Alpha Fund is one of the three top investors in Version One’s latest fund with a stake of more than 10 per cent, marking the fund’s first investment in Canada.
“We’re pretty bullish on Canada,” said Evan Jaysane-Darr, portfolio manager with the Venture Alpha Fund. “There are a lot of interesting things happening in artificial intelligence, blockchain, enterprise software-as-as-service, social networks, messaging, even e-commerce out of Canada right now. Canada is having a bit of a moment.”
Mr. Jaysane-Darr said he is drawn to Version One in part because Mr. Wertz and fellow general partner, Silicon Valley-based Angela Tran Kingyens, take a “thoughtful, independent no-hype approach to investing” and aren’t driven by fads or momentum plays. Mr. Jaysane-Darr, who also considered investing in Golden’s last fund, said both are “best-in-class seed venture funds in Canada” with performance that “stacks up very well” against similarly focused funds in the United States.
Notably, both Version One and Golden hit their recent fundraising targets without funding from the Business Development Bank of Canada, the federal Crown corporation that has helped nurse Canada’s once-depleted venture capital sector back to health over the past decade. “It’s good for us, ultimately you want to be independent of government funding,” Mr. Wertz said.
Version One, which raised a $35-million fund in 2014 and an $18.7-million fund in 2012, plans to stick to its past investing strategy, focusing on seed-stage firms aiming to leverage software-based “network-effects” by creating value from bringing mass amounts of users together. It was an early backer of Toronto-based Wattpad Corp., a global platform used by tens of millions of writers and readers of fan fiction, as well as Venture Hacks, Inc., whose AngelList is a popular website for job- and investment-seekers in the startup space. Version One-backed firms have sold to Twitter, Salesforce.com and Google.
The firm, which invests roughly half its proceeds in Canada and half in the United States, has recently expanded its investing scope to include firms in the cryptocurrency and digital health-care space. Thanks to relationships with top-tier U.S. venture-capital firms such as Union Square Ventures and Andreessen Horowitz, Version One has managed to get in on some of North America’s most oversubscribed early-stage deals of the past year, including financing for cryptocurrency trading platform Coinbase and CryptoKitties, which creates collectible virtual animated cats based on blockchain technology. “They’re seeing really high quality deal flow from across North America,” said Ian Carew, a director with Northleaf Capital, an investor in all three Version One funds.